KOHL INVESTIGATES USE OF QUESTIONABLE SENIOR FINANCIAL ADVISOR DESIGNATIONS

WASHINGTON - On Wednesday, September 5, U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) held a hearing to examine some of the questionable practices used by so-called senior financial investment specialists in order to gain access to the retirement savings of older Americans. An investigation conducted by the Aging Committee has revealed that many of the designations that have been cropping up represent limited or no value with respect to advising seniors on financial matters, and that often these designations are obtained simply by attending a weekend seminar and passing an open-book, multiple-choice test. Many seniors targeted by salesmen using these designations have lost their life savings because they were steered toward investment instruments that were unsuitable for them, given their retirement needs and life expectancy. Following today's hearing, Chairman Kohl intends to develop legislation that will provide a uniform standard for the accreditation of senior financial advisors that state regulators would be encouraged to adopt. 

 

"We know that an attorney must go to school for three years and pass a state bar exam. A CPA must have a college degree, an additional year of study and must pass a national exam. Neither can offer their professional services without those credentials," said Chairman Kohl. "Seniors should be able to trust the people who invest their money. They should not be worried that the title after their advisor's name is scarcely more than a marketing ploy, and that it was not earned through sufficiently rigorous financial education or training."

 

At today's hearing, Chairman Christopher Cox of the U.S. Securities and Exchange Commission (SEC) offered testimony about the SEC's relatively new initiatives targeting senior investment fraud, setting the stage for their upcoming Senior Investment Summit scheduled to take place September 10. Minnesota's Attorney General, Lori Swanson, spoke on the second panel about her state's efforts to eliminate senior investment fraud, citing specific complaints filed by Minnesota against companies that are inappropriately selling annuities to seniors. William Galvin, Secretary of the Commonwealth of Massachusetts, offered testimony about the broad range of violations his office has encountered involving questionable senior financial advisor designations. Massachusetts was the first state to conceive and impose a regulatory structure upon this complex issue, with Washington and Nebraska following.

 

Other witnesses on the second panel included Joseph Borg, Director of the Alabama Securities Commission and President of the North American Securities Administrators Association (NASAA); Nicolas Nicolette, President of the Financial Planning Association (FPA); and Sandy Praeger, Insurance Commissioner for the state of Kansas and President-Elect of the National Association of Insurance Commissioners (NAIC). Borg discussed NASAA's state-by-state efforts to combat the problems caused by the proliferation of inappropriate senior financial advisor designations, and outlined NASAA's policy that would make it a violation of the law to use a designation to mislead investors.  Nicolette testified about the value of legitimate senior financial advisor designations and education, such as Certified Financial Planner (CFP).  Nicolette also described the impact that inappropriate designations have on the credibility of the legitimate industry, and what efforts FPA and other organizations are taking to protect that credibility. Praeger spoke to the Committee about the NAIC's Suitability Model with respect to the sale of all life insurance and annuity products.

 

On the final panel, Gary Bhojwani, President and CEO of Allianz of America Corporation, responded to the allegations of sales and marketing abuses levied against his company both by state regulators and the media. As part of his testimony, Bhojwani announced several new policies in an effort to safeguard seniors: the appointment of a Chief Suitability Officer, the development of an internal list of approved senior advisor certifications, and the institution of a process through which every annuity purchaser over the age of 75 receives a follow-up call from Allianz. Lastly, Edward Pittock, President of the Society of Certified Senior Advisors, offered testimony in response to criticism from state regulators that the Certified Senior Advisor designation is often misused or misrepresented as signifying financial expertise, which Pittock contends is not its purpose or intention. Several firms recently have stopped using the CSA designation.

 

In a written statement submitted for the record, CFP Board announced the creation of an internal task force to examine their policies as related to senior advisor designations, the results of which will be released July 2008.

 

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